Handling consignment sales

Legacy KB ID: 5491

Question

I allow an outside product developer to display their merchandise in my shop on a consignment basis.  I do not pay the supplier anything when I take the item for display but I will get a percentage on the sale.  How do I set up accounts and items to track these types of consignment sales?

Answer

Here's one way you can track consignment sales:

1.    In your Suppliers list, create a new supplier for each consignment supplier.

Supplier Centre > New supplier

2.    Create an income account called Consignment Sales to track the consignment sales separately from the rest of the products you sell.

List > Chart of Accounts > Account > New > Income

3.    Create an other asset account called Inventory on Consignment to track the inventory of the consignment products you sell.

List > Chart of Accounts > Account > New > Other Account Type > Other Asset

4.    Set up consignment items for each consignment product (or group of products) you sell.

a.    For Low Volume consignment Items and Transactions:

                                          i.    Lists> Item List > Item > New > Inventory Part

                                         ii.    Cost: The amount you intend to pay the consignment supplier

                                        iii.    COGS Account: Cost of Goods Sold (or a separate COGS account if you prefer to track consignment costs separately from other product sales costs).

                                       iv.    Preferred supplier: The name of the consignment supplier for this item.

                                        v.    Sales price: The price for this item.

                                       vi.    Tax code: The appropriate tax code for the sale of this item.

                                      vii.    Income account: Consignment Sales.

                                     viii.    Asset account: Inventory on Consignment.

                                       ix.    Reorder point: leave blank.

                                        x.    Add a Custom Field for items called Consignor. Enter the supplier name in the Consignor field.

 

b.    For High Volume consignment items and transactions, use a single non-inventory part item. Do not create separate items for consignment sales and consignment purchases.

                                          i.    Lists> Item List > Item > New > Non-Inventory Part

                                         ii.    Name:  Consigned Item

                                        iii.    Select "This item is purchased for and sold to a specific customer:job".

                                       iv.    Cost: $0.

                                        v.    Expense Account: Inventory on Consignment. (This is an asset you created earlier to track your consignment inventory).

                                       vi.    Preferred supplier: Leave blank.

                                      vii.    Sales price: $0.

                                     viii.    Tax code: The appropriate tax code for the sale of consignment items.

                                       ix.    Income account: Consignment Sales.

                                        x.    Add a Custom Field for items called Consignor. Leave the Consignor field blank.

To ensure your reports accurately reflect the total costs and total sales of consignment items, you must use the same non-inventory part item on both sales forms and purchase orders.

 

5.    Create or customise form templates to record all of your consignment sales. Include the Consignor column on the customised sales receipt or invoice.

a.    Go to the Lists menu and click Templates.

b.    Click Templates at the bottom of the list and click New.

c.    Select Sales Receipt and click OK.

d.    Click Manage Templates.

e.    Enter Consignment Sale in the Template Name field.

f.     Click OK.

g.    Click Additional Customisation.

h.    Modify the Header sections to reflect your business needs and then click the Columns tab.

i.      On the Columns tab, click in the Screen column of the Consignor Line (at the bottom).

a.    If Consignor does not show on the bottom line, you need to add the custom field discussed on the setting up your Consignment items page.

b.    By displaying the Consignor field on your sales receipt, you'll be able to enter the consignment supplier as you sell the item. This is necessary to track which consignment suppliers' products have been sold.

j.     If you want to change the position of fields or other elements on the form, click Layout Designer.

k.    Click OK to save your changes.

l.      To use the template to record your consignment sales, choose Consignment Sale from the Template drop-down list on the sales receipt form.

 

When receiving an item on consignment

1.    Go to the Suppliers menu and click Receive Items.

2.    In the Receive Items window, enter the consignment supplier in the Supplier field.

3.    If necessary, set up the Supplier's complete information in the Supplier list.

4.    Fill in the date, the total amount to be paid to the supplier, and the reference number.

5.    Click on the Items tab and enter the name of the consignment item and the cost.

6.    In the Memo field, enter a description of the item.

7.    Save the item receipt.

This will record the receipt of the item, and will increase the balance of your consignment inventory account.

Make sure you label the item with the supplier name and the sales price so you'll know which supplier to pay when you sell the item.

 

Recording a consignment sales

1.    Go to the Customers menu and click Enter Sales Receipts.

2.    Click the Template drop-down list and choose Consignment Sale.

3.    If you do not have a Consignment Sale item in your Template drop-down list, you can add a customised sales receipt template.

4.    As you fill in each consignment item on the sale, enter the name of the Consignment supplier in the Consignor column.

5.    Note: If you entered the name in the Consignor item as you created each item, Reckon Accounts will enter the supplier name for you. Otherwise, you'll need to enter it.

6.    If you don't have a Consignor field, you need to customise your sales template to add the Consignor column.

7.    Finish filling out the form and then save the sale.

8.    Because of the way you have set up your consignment items, Reckon Accounts assigns the sale to your Consignment Sales account. If you used inventory items for your consignment items, Reckon Accounts has also reduced the amount of your Consignment Inventory account.

9.    If you used non-inventory items, the balance of Consignment Inventory has not changed. You'll adjust it when you pay the supplier.

10. On a periodic basis, you will need to pay your consignment suppliers the money you've received from customers, minus your consignment fee.

 

Reporting on consignment sales

1.    Create a custom transaction detail report that shows your consignment sales for the current period, and filter the custom transaction report by consignment supplier.

2.    Go to the Reports menu and click Custom Transaction Detail Report.

3.    Click Modify Report at the top of the report.

4.    Click the Filters tab.

5.    Select Item from the Filter scroll box.

6.    Click the Item drop-down list and choose Selected items (you may need to scroll up to see it).

7.    Select the items you want included in the report.

8.    Select Account from the Filter scroll box.

9.    Click the Account drop-down list and choose All ordinary income accounts. This ensures that your report will only include a single line for each consignment item.

10. Click the Display tab. Scroll down and click on the Consignor item.

11. Click the Sort by drop-down list and choose Consignor.

12. Click OK to open the report.

You can use this report to make a list of the consignment suppliers who need to be paid. For each supplier in the Consignment column, convert the item receipts into bills, and pay the bills.

 

Paying your consignment suppliers

1.    Go to the Suppliers menu and click Enter Bill for Received items.

2.    Enter the consignment supplier in the Supplier field.

3.    In the Choose the Item Receipt which corresponds to your billsection, select the Item Receipt for the consignment item that has been sold.

a.    Note: If you do not find the item receipt in this section, you may not have used an Item Receipt to record the initial receipt of the item. See Receiving Items on Consignment.

4.    Click OK.

5.    This displays the Item Receipt you entered when you originally received the consignment item.

a.    It also turns the Item Receipt into a Bill (see the tick in Bill Received field). This bill will show up in your Pay Bills window the next time you pay bills.

6.    If necessary, adjust the amount of the bill and the due date.

7.    If you don't use inventory items to track your consignment sales, you'll need to adjust consignment inventory as follows:

a.    Click the Expenses tab on the bill. Don't change the items on the Items tab.

b.    On the first line of the expenses tab, enter Inventory on Consignment in the account field, and enter the amount of the bill as a negative number.

c.    On the second line, enter Cost of Goods Sold, and enter the amount of the bill as a positive number.

These last two lines cancel each other out, but they are necessary to reduce your consignment inventory and record the cost of the item to the Cost of Good Sold account.

8.    Save the bill.

9.    Use Pay Bills to pay your suppliers.

 

Need more help?

Ask the Reckon Community at: https://community.reckon.com/

Or Log a Support Ticket: https://www.reckon.com/au/support/

 

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